MSP Deadlock Explained: Why Are Farmers Not Convinced About The Centre's 5-Year MSP Plan?

The deadlock between the government and protesting farmers rolled into a second week Monday, with no definite breakthrough after four rounds of talks but signs of an accord on the horizon.

At a meeting late Sunday, the government - facing a second round of farmers' protests, this time just weeks before a general election - relented on the subject of MSP, or minimum support price, proposing a five-year contract to buy pulses, maize, and cotton.

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The farmers - for whom MSP is a red-flag issue - asked, and were given, 48 hours to confer, and 'Delhi Chalo 2.0' has been put on hold. A legal assurance for MSP is seen as No.1 on the farmers' wish list. The two sides met in Chandigarh, with the government represented by three union ministers, including Commerce Minister Piyush Goyal, reported ANI.

The first signs, though, are not encouraging, with farmer leaders saying that the government must offer guarantees on all 23 crops, and not just dal or maize. Those from Punjab - from where a bulk of protesting farmers hail - have pointed out that their share of growing pulses or maize is, in any case, low. "There is no benefit to Punjab, Haryana farmers from this incomplete proposal."

Farmers-Government Agree On MSP?

In brief, the following points emerged from the Chandigarh meeting:

• Union cooperative societies like NCCF, or National Cooperative Consumers Federation, and NAFED, or the National Agricultural Cooperative Marketing Federation of India - will sign a five-year contract to buy dal or maize.
• Under this contract, the above crops will be bought at MSPs.
• There will be no limit on purchase quantities and a website will be made.
• Goyal said the offer is part of a long-term strategy to increase maize production "as a major feedstock for grain-based ethanol supply".

It will save Punjab's farming sector, improve the groundwater table, and save land - already under stress - from getting barren, he explained. The government - trying to encourage maize and dal as part of its "crop diversification" - set the MSP maize at ₹ 2,090 per quintal last year, up from ₹ 1,760 in 2019.

Concerns over groundwater have been expressed in the past too; in November last year, the Supreme Court warned Punjab to take measures - including switching to maize. This was in the context of a hearing on air quality pollution - triggered by the burning of farm (paddy) waste - in the Delhi region. An estimated record 346.13 lakh tons of maize was grown in 2022/23.

Current MSP Scheme

At present, MSP is offered on 23 crops apart from staples like paddy, wheat, pulses, and maize. These include ragi, groundnut, soybean, sunflower seeds, barley, rapeseed, and mustard, as per PTI reports.

2023 prices were announced in June when kharif crop MSPs were increased - and fixed at a level at least 1.5 times the All-India weighted average cost of production - "to ensure remunerative prices for their produce and to encourage crop diversification".

Farmers' MSP Demand

In addition to legal backing for MSPs, the farmers want the Swaminathan Commission's recommendations to be implemented, as well as pensions for farmers and farm labourers. The Swaminathan Commission's recommendations on MSP are worth mentioning since it suggested the floor price be set at least 50 per cent above the weighted average cost of production, reported NDTV.

This is known as the C2+50 formula, which factors the cost of capital and land rent in setting MSPs. The umbrella farmer body behind this round of protests, the Samyukt Kisan Morcha, has indicated it is unwilling to accept anything less than that formula.

What Is MSP?

MSP is a form of market intervention and refers to a set fixed by the government to protect farmers from a steep fall in crop prices; for example, during a bumper crop when prices plummet. Essentially, every year the government purchases a quantity of certain crops, the list and prices of which are announced before sowing.

The purpose is not only to allow farmers a minimum return on (part of) their investment but also to procure crops for the government's public distribution system. The MSP is the floor price, i.e., it is the minimum at which a crop can be bought in the market.

MSPs, however, have no legal backing, meaning the government is not obliged to buy, for example, 10 per cent of a farmer's paddy crop at the floor price. And it is this that the farmers want to be changed. The row over MSP made headlines four years ago after the second of the Modi government's three "black" laws, which were scrapped after the farmers' 2020/21 protest.

This law - the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act - said crop prices would be determined by market forces - i.e., farmers would get more for in-demand crops. The farmers, however, felt this would abolish, by default, the MSP feature. The government sought, unsuccessfully, to allay these fears, as reported by NDTV.

Farmers' Other Demands

Meanwhile, the farmers also want debt waivers, no hike in electricity tariffs, and withdrawal of police cases filed in the 2020/21 protests when they had violent clashes with security personnel.

Finally, they also want justice for farmers killed in Uttar Pradesh's Lakhimpur Kheri, reinstatement of the Land Acquisition Act, and compensation to the families of those who died four years ago, as per media reports.

Where Are The Farmers Now?

Protesting farmers are now camped around 200 km from Delhi, with multiple fortifications and barriers - from concrete blocks and barbed wire to nail strips and metal barricades - in their way. They are, for now, being held at the Shambhu border crossing between Punjab and Haryana.

The protest began last week; a small crowd at Shambhu were tear-gassed by Haryana police officials, who fired over two dozen shells in a warning salvo. Since then, though, the situation has been calm.